The Cambridgeshire hospital, which is run by Circle, expects to break even this year and produce a small surplus in 2015.

Its success is a blow to Labour leader Ed Miliband who last week claimed the NHS was going backwards thanks to private sector involvement.

Julie Bailey, the founder of Cure the NHS who helped expose the Mid Staffordshire neglect scandal, said: ‘What this shows is the potential of allowing those on the frontline to lead, as Circle do.

‘The potential is there within the NHS – the majority of people wouldn’t care who provides their services as long as it was safe.’

Hinchingbrooke, which is in Huntingdon and serves 160,000 patients, was described as a ‘financial and clinical basket case’ by then health minister Earl Howe in November 2011.

Healthcare assistants pictured working on the stroke ward at Hinchingbrooke Hospital in Huntingdon in 2011

The Royal College of Surgeons branded the 369-bed hospital ‘dysfunctional’.

It was among the lowest ranking trusts in the region for patient satisfaction. Waiting time in accident and emergency regularly exceeded four hours and every target for suspected cancer patients to be seen within a fortnight had been missed since June 2010.

Circle took over in February 2012 – the first private contract for an NHS hospital – on a ten-year deal and quickly saw results.

It topped a ranking of 46 trusts in the Midlands and East Anglia for A&E waiting times, with 98.2 per cent of patients seen within the required window. It was fifth for referrals for cancer tests.

Its success is a blow to Labour leader Ed Miliband who last week claimed the NHS was going backwards thanks to private sector involvement

A key to the transformation was loosening the grip of managers and accountants. The majority of the 15 board members are now clinicians.

Doctors, nurses and admin staff have also been put into small groups which have representatives who meet senior managers twice a month to flag up problems.

Nurses can recommend that consultants adjust the way they work.

Patients are asked for feedback and any problems must be dealt with within three weeks.

Circle’s John Lewis-style blueprint could be adopted at other failing hospitals, although insiders believe no decision will be taken until after the general election.

Circle reduced the annual £10million deficit to £3.5million in its first year – and made up the difference with its own money.

This dropped to £1million last year and the trust, whose chief executive Steve Melton is a former Argos supply chain director, expects to break even this year before moving into the black in 2015.

A spokesman said: ‘The biggest chunk of the savings was from improving quality.

Bad quality care exposes you to lots more litigation for mistakes. Patients also stay longer than necessary or have to come back for further treatment. Locum costs have also dropped.

There is a 50 per cent premium for temporary staff and the hospital had problems with recruiting as people didn’t want to work there.’

Private firms already own and run limited units for the NHS. Circle operates day-surgery units in Nottingham where routine operations including hip and knee replacements are carried out – but the wholesale takeover of a hospital had never been approved previously.

Huntingdon Conservative MP Jonathan Djanogly said: ‘Before this contract was in place there was an annual deep breath about what was going to happen and whether the hospital was going to survive.‘Now there’s a future for the hospital and we know through the security of the contract that they can operate for a certain period. I don’t know where that leaves Ed Miliband.’

Hinchingbrooke was the only small hospital on a CHKS Group quality care awards shortlist of five on Tuesday.

The 12 indicators looked at by an expert panel also included rates of emergency readmission, discharge within 56 days of emergency admission for strokes and discharge within 28 days for hip fractures.

Mr Melton said: ‘Two years ago, Hinchingbrooke suffered from a series of problems so severe it faced imminent closure. Now, thanks to the incredible efforts of our leading doctors and nurses, we are the top-ranking hospital for quality of care in the whole of England.

‘It is clear proof the growing number of hospitals in special measures across the NHS can be transformed too, staying open to deliver the critical services their patients need.’

A Department of Health spokesman said: ‘Patients should get the best possible care, regardless of who provides it.’

CARE THAT IS 'ABSOLUTELY FIRST CLASS'

Looked after: Phil Martin at the hospital

Living only a short distance from Hinchingbrooke Hospital, Phil Martin had heard plenty of ‘horror stories’ from other patients.

But after seven major operations in the space of a few weeks, his own experience couldn’t be more different.

The grandfather-of-two said his treatment had been ‘spectacular’ since he was admitted with septicaemia caused by a cyst.

‘It’s been absolutely first class. I couldn’t have asked for more,’ said the 61-year-old from Eaton Socon, near St Neots.

‘The first time I came in as an emergency walk-in they apologised and said it would be 90 minutes. When I was in intensive care … I had two nurses looking after me full-time.

‘Now I’m on a general ward I am with five other people and we are well looked after. I am always kept in the picture and staff are very reactive.’

The father-of-four, a widower who is chairman of a purchasing consortium, was in acute pain when he was admitted five weeks ago and underwent several procedures to save his life.

He spent nine days in an induced coma and was moved to a general ward last week.

Speaking from his hospital bed yesterday, he added: ‘I haven’t experienced any of these horror stories. Yesterday I was bored out of my skull so I started drafting a couple of letters about people who deserve to be commended.’

The hospital also received glowing reviews from Lilian Carris.

She had ‘hated’ her first stay at the hospital in 1999 and when she was put on to a mixed-sex ward with seven other patients.

But the 65-year-old was overwhelmed by the remarkable turnaround at the hospital when she was readmitted earlier this year. Mrs Carris said the exceptional level of care was so good that many older patients ‘did not want to leave’.

After being admitted in February following a severe asthma attack, the mother-of-one said she ‘couldn’t believe’ the number of nurses and doctors constantly on hand to provide assistance.

‘They weren’t there just to care. They were investigating all the possibilities of what was wrong with me,’ she said.

She said the standards at the hospital are ‘so much better’ than when she had her appendix removed there 15 years ago – and said even the food is ‘excellent’, with patients offered five choices for each course and allowed to order 24 hours in advance.

Relatives are not limited to strict visiting times, common at many NHS hospitals, and are allowed to see patients when they wish.